J.C. Penney is changing

J.C. Penney is changing

Posted: Monday, February 13, 2012 10:25 pm
By: By A. D’INNOCENZIO AP Retail Writer

By A. D’INNOCENZIO
AP Retail Writer
NEW YORK (AP) — Everyone wants to see what Ron Johnson will do next.
For 15 years, Johnson worked at Target, where he pioneered the retailer’s cheap chic image. Then, he spent about a decade changing the way Americans shop for electronic gadgets at Apple. Now, the question is whether Johnson will strike creative genius a third time as CEO of J.C. Penney.
The 30-year retail industry veteran already is borrowing from Apple’s playbook by innovating Penney’s stores, cutting out heavy discounting and providing services not just products.
As part of a strategy it announced last week, Penney is getting rid of the hundreds of sales it has each year to focus on every day pricing. The retailer will offer discounts on group of different items each month and clearance sales on the first and third Fridays of the month when many of its customers are paid.
Additionally, Penney in the next few years is planning to open areas in the middle of its stores called Town Square. Like the popular Apple Genius Bars that Johnson created so customers can get hands-on technical support, Town Square areas will offer services although the company has been tight-lipped about which ones. The rest of the store will be divided into 100 specialty shops.
Despite Johnson’s impressive retail resume, overhauling Penney won’t be easy. Department stores, as a whole, have lost market share to specialty retailers like H&M and Zara whose stores have “wow” factor. The group’s market share in clothing and other areas fell to 31 percent last year from 57 percent in 1992.
And Penney, in particular, has struggled. The retailer’s sales have slipped as its core middle-class customers have been among the hardest hit by the economic downturn, it has failed to attract younger customers with its stodgy image and its stores increasingly look uninviting compared to competitors.
For the 11 months through December, Penney’s revenue at stores opened at least a year — an indicator of a retailer’s health — rose 0.7 percent, while competitors like Macy’s Inc. rose 5.4 percent, and Kohl’s was up 1.1 percent. Penney posted a loss in the third quarter and cut its fourth-quarter earnings outlook after a disappointing holiday season when it had to do some deep discounting to lure in customers.
During an hour-long interview this month at Penney’s Plano, Texas, headquarters, Johnson, 52, talked about everything from the challenges Penney faces to where he likes to shop. Johnson, who started his job at Penney in November, mentioned Apple 19 times.
Here are some excerpts from the interview:
Q. Why Penney?
A. I chose J.C. Penney because I think it’s the single biggest opportunity in American retailing. Inherently, department stores have significant advantages compared to all other retailers. Yet, our productivity is at the low end, and that just doesn’t make sense.
Q. What was your first impression of Penney?
A. I would describe J.C. Penney as one of a handful of great American brands that seemed like it was dormant, that had been a great part of the fabric of America for almost a century but it just wasn’t modern. It wasn’t top of mind. Everybody can tell a story about their mom or their grandma or the old catalog days. But they don’t have modern stories. Because we haven’t been creative enough so we have to rethink everything.
Q. Who are the chain’s competitors?
A. Our number one competitor is ourselves and our way of thinking, which is informed by decades of experience.
It’s not another store; it’s not another format like the Internet.
Our competition is ourselves and our best friend is our imagination.

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